As Nadella And Mulally Lead In Microsoft’s CEO Hunt, The Internal/External Debate Continues

According to Bloomberg, the potential pool of candidates being considered for the role of next CEO of Microsoft has narrowed, at least for the moment. Ford CEO Alan Mulally and current Microsoft executive vice president Satya Nadella are said to be the two front-runners.

If true, it’s hardly a surprising shortlist. Mulally is a longtime ally of current Microsoft CEO Steve Ballmer; had a hand in designing its reorganization; and has secured a spot in business case studies for the next few decades due to his role in doing the same, successfully, at the Ford Motor Company.

Nadella, meanwhile, is a strong internal candidate. He’s a respected technologist; and long-term Microsoft executive who has held a number of roles from developer relations through to building Microsoft’s cloud business.

The bond between Ballmer and Mulally runs deep. When Mulally was named to the 2009 Time 100 list, Ballmer wrote his entry:

“It is extremely rare for one leader to play a major role in two of America’s top industries,” noted Ballmer. “Alan Mulally is that rare case. […]

“Changing industries can upset even the most seasoned executive. Not Alan. He understands the fundamentals of business success as well as any business leader I know.”

It’s almost humorous how well Ballmer’s accolade from four years ago suits Mulally and Microsoft today. Two top industries? Why not three. If Alan understands the core tenets of business so strongly, perhaps he could manage a software company as well as he’s managed more industrial enterprises.

Nadella, on the other hand, is a technologist’s technologist. I first met him, around a year ago, digging into how Microsoft’s Azure was born, and how the cloud was set to change both Microsoft and the larger software market. Nadella’s explanation sounds very prescient in hindsight, too:

[W]hat we’re doing across the company between devices and the cloud and services is the front and center priority for us, and we are well on our way with that, given what we have done with Windows 8 and what we are doing with Windows Phone and Windows Azure. I think that represents the core of the reinvention and the re-imagination of the Windows franchise

What Nadella outlined a year ago has come to bear out in a number of ways. Cloud-based businesses and services at Microsoft have had a strong last year, with several cresting the $1 billion revenue mark. Lync, Office 365, and Azure are each now generating 10-figure top line for Microsoft. As the company’s OEM revenue from Windows slows and slips, the fresh top line is more than welcome.

One catch in all this: Nadella may end up being considered too internal, or perhaps too important in his current role to move up to the CEO spot. Remove Nadella from his current rank atop Azure and the rest of his reports, and you have to find someone to replace him. That’s not simple.

In that regard, one reason that Mulally could make a compelling chief executive is that if you like the way that Microsoft has set up its current roster of executive vice presidents (the folks one step below the CEO), under his tenure, that makeup could be maintained — assuming people stay on board with the new exec, and he decides not to shake things up.

AllThingsD’s Kara Swisher made the point recently that Microsoft might hire Mulally to step in and manage the company, as it trains up an internal candidate to take over:

“[T]he idea [of Mulally is] that he will be more a “caretaker” type CEO, whose deep experience and inspirational charisma will get the company on the right path, while also training up a number of internal candidates to eventually take over from him.”

Under that rubric, Microsoft could end up first with Mulally, and second with Nadella. Perhaps.

However, as journalist Simon Bisson pointed out this morning on Twitter, “[t]he one point to remember is that Ballmer said they were looking for a CEO for the next decade.” That cuts at the idea that the board will pick someone to simply come over, holding things in place while an internal candidate is made ready.

Mulally had a hand in the rebuilding of Microsoft’s internal structure. The Wall Street Journal has the scene in detail:

Mr. Ballmer brought a messenger bag, pulling out onto a table an array of phones and tablets from Microsoft and competitors. He asked Mr. Mulally how he turned around Ford. For four hours, he says, Mr. Mulally detailed how teamwork and simplifying the Ford brand helped him reposition it.

Reading that, it almost feels that Mulally may have already offered Microsoft his best advice, such that it led to the shape of the reorganization that may be key to Microsoft bettering its internal harmony so that its teams edify one another, and not harm one another as in the past.

Nadella’s contribution to Microsoft is, by simplistic comparison, hardly complete. What he brings to the table is technical knowledge at a time in which the company is rebuilding itself. A sample from Microsoft’s recent FAM day, when Nadella and other executive vice president’s were interviewed:

“So one thing I would add is when we think about the platform as Terry and team are working on even bringing all our client platforms together and the tooling around it is, in fact, going to facilitate a lot of the sharing of the assets for the developers, which is very, very important for us.

“But there’s no application that gets built today in the enterprise or in the consumer space that doesn’t have a huge cloud element. In fact, even Office 365 is a programming surface area.

“So we’re really building out our tooling across all of our assets and enabling these developers to exploit our broadest platform, and I think that’s another source of innovation around our platforms that I think will translate into sort of unique app experiences for our platforms.”

The above is the simple gist of how Microsoft’s platforms (which are increasingly harmonized) will sit atop the cloud. Would Mulally be able to understand the above concepts deeply enough to ensure that resource allocation remains appropriate, and even aggressive? His history indicates that even if he may not have the tech experience, he might yet have that exact moxie.